I’ve been mulling on something for a while and it all boils down to value. Let me explain. I came to a bit of an epiphany when I realised that to me, Google Reader is now a very valuable business tool, yet I pay nothing for it. I would, not a lot – perhaps $10 per year – which is a lot more than Google currently gets from me. Obviously this is a massive opportunity lost, not just to Google but to all the other RSS aggregators out there. I came to this realisation when I installed a new addon, called read it later. This is a feature I’ve wanted for a while, again I’d have happily paid for it. Again it was given to me free.
Who is it that decides what is free and what isn’t, and how are they making these decisions without understanding value. It’s all distorted. I’ve seen what a CAL costs for MS exchange. Yet I don’t value exchange that much. I sure as hell notice it when it crashes, or is slow. But to me its infrastructure, same as the roads we drive down. Why do I pay for that and not the RSS bit which is more valuable? Because the software vendors don’t charge that way.
In a SaaS world, the opportunity exists to revisit this distortion in the value-payment continuum. How? Early on I heard the maxim used to describe SaaS vs on premise .
“On premise you use the software cos you paid for it, in a SaaS world you pay for the software cos you use it”
…. and that’s the crux. If it’s valuable you will use it. If you can find out how much it’s valued, then that helps you set the price. I’m hopeful this will occur, unfortunately as the example above illustrates the industry has had a bit of a chequered start. Perhaps the current financial crisis will drive a new reality?
What is clear to me, before long a lot more effort needs to be put in place to understand what applications and functions within applications are valuable and to who… there in lies your future pricing strategy